The BSE benchmark Sensex continued to rule above the 20,000 level during late morning session due to buying in refinery and PSU sectors.
The operators feel lower oil subsidy burden will improve government's finances after it allowed PSU oil manufacturing companies to change diesel prices by a small margin from time to time.
Sustained capital inflows from foreign funds also boosted the market sentiment.
The BSE-30 share index, Sensex, resumed higher at 20,038.67 and moved up further to 20,126.55 before quoting 20,086.62 points at 1030 hrs.
It showed a net gain of 122.59 points or 0.61 per cent from its last close.
Foreign institutional investors (FIIs) bought shares worth a net Rs 564.20 crore yesterday, as per provisional data from the stock exchanges.
The NSE 50-share index, Nifty, also moved up by 31.55 points or 0.52 per cent quoting 6,070.15 at 1030 hrs.
Major gainers were - ONGC (7.97 per cent), Maruti (3.44 pc), Gail India (3.07 pc), Coal India (1.57 pc), SBI (1.48 pc), Cipla (1.25 pc) and Hindalco (1.19 pc).
Asian stocks also rose after economic reports in the world's two largest economies, the US and China, beat estimates.
Key benchmark indices in Hong Kong, Indonesia, Japan, Taiwan, Singapore and South Korea rose by 0.36 to 2.56 per cent.
Stocks More on Maruti
Company INFO More on ONGC
GLOBAL MARKETS ROUND UP
Nifty futures on the Singapore Exchange rose 0.36 percent. The MSCI-Asia Pacific index, excluding Japan was up 0.51 percent.
Asian shares advanced on Friday as encouraging Chinese data confirmed a recovery was on track in the world's second largest economy, cementing positive sentiment after global equities rose overnight.
Stronger-than-expected data on U.S. housing starts and jobless claims lit a fire under stocks on Thursday, pushing the S&P 500 to a five-year high and its third day of gains.
FACTORS TO WATCH
Earnings: Reliance Industries Ltd, HDFC Bank , ITC Ltd
Kingfisher Ltd's core lenders to meet SEBI's board meeting
INDIAN STOCKS TO WATCH
India's government told fuel retailers to raise the price of subsidised diesel in small amounts every month starting Friday in an attempt to prop up public finances without causing a popular backlash before elections.
The government has called for increases of about 1 U.S. cent per litre each month, a source at one of the oil retailers with direct